Proposal for a Global Taxation System
– DAGTVA truth table –
DAGTVA® – The linkage rules of the taxation system
|No.||Problems exposed, requests, constraints and subjects||Origin||Pg||Li||Ref.|
|22||New link rules applicable to modeste economies.||Pillar 1||5||35||RLEmo|
Quote : New link rule – The new nexus could have thresholds (RLSca) including country specific sales thresholds calibrated to ensure that jurisdictions with smaller economies can also benefit (RLEmo).
Poorest economies often have no other options than to import products that they cannot, for various reasons, deliver by domestic productions to their consumers. With the digital economy, this ‘facility’ to import is exacerbated by the establishment of means of communication linked to the Internet and mobile telephony. It followed, for these poor countries, a flight of the weak wealth linked to cross-border payments, with this recurring problem of financing imports all the more significant in these circumstances.
The Wayfair Sale Tax, following the decision 17-494 Wayfair Inc. by the US Supreme Court, brings a fraction of the solution to the financing of imports by the return of a portion of sale taxes applied in the production/distribution State. It is in this way that the Word Single Taxation (W.S.T.) must seek its solution. As the current international tax system functions poorly, this study will provide a new structure based on the structure of this WSTAX (1), added to two elements: the first of which will provide proof that the new DAGTVA transfer pricing calculation will considerably rebalance modest economies and the second with the new distribution system for international aid, based on transactional balances, to provide the essential complement to what WSTax cannot fill.
(1) Wayfair Sale Tax transformed into Wayfair State TAX – either: WSTAX.
Indeed and in all cases of application of this law, it will be only a part of the sales taxes which will be returned to the market State, for the simple reason that in a production State, the sale taxes corresponds to the production tax at the final stage of the sale (the Output VAT in the VAT system when the production is sell by the productor). If all this production tax were returned to the market State, the production State would no longer have indirect income on its exported productions, although this was often observed in the non-taxation of exports. You will see later in the study that if we are not going to return all the indirect taxation to the market State, the latter, through its tax authorities, will have with DAGTVA, a perfect knowledge of the ins and outs about the transaction in function of tax variables between the two States.
An obvious imbalance in the commercial and fiscal consequences will therefore have to result in actions which will be detailed in the DAGTVA transfer pricing calculation because this imbalance can come from two sources: on the one hand, the commercial aggressiveness of the company which will be largely constrained, on the other hand, the actions of ‘non-cooperative’ States which will be ‘punished’ instantly! As has just been specified. You will see that the field where companies can maneuver in the both States will be greatly constrained, leading to a balance in international economic development by putting an end to the tax anarchy observed today.
To conclude this section devoted to modest economies, we note that in a country in this situation, today the direct and indirect taxation is difficult to apply because it directly impacts an often low local purchasing power. To respond to this difficulty, the DAGTVA system is based on the calculation of a transfer price defining the value of a theoretical market price adapted to a local sale of the existing equivalent product or which could exist by comparison, thus respecting an ethical trade and the arm’s length principle. The margin of action of the MNE / State couple in each of the two States will be constrained by this, but will benefit from a development regulation beneficial to the modest economy by prohibiting inadmissible drifts.
One can even consider applying the sales tax refund at the higher rate of a production state (not covered in the presentation) , which may help a country with a modest economy to receive sale taxes from a producer with a higher level than what it himself could have taxed, by the sole fact that it is difficult to apply a high or unsuitable level of indirect taxation on consumption in a country where the purchasing power of consumers is low.